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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 20.05.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2005-06.
The only ground raised by the assessee is against the confirmation of addition of Rs.16,48,417/- under section 68 of the Act as made by the AO towards the bogus transaction.
The facts in brief are that the case of the assessee was reopened under section 147 by issuing notice under section 2 Mr. Alpesh Popatlal Rathod 148 dated 28.03.2012 after the AO received information from the DGIT (Inv.) Wing, Mumbai that assessee was beneficiary of hawala racket operated by Mahasagar Securities Ltd. Accordingly, the assessee was issued a show cause notice as to why the transactions of sale of shares of Rs.16,48,417/- should not be added to the income of the assessee under section 68 of the Act as there is no actual sale and purchase of shares or securities but the same were only manipulated sale and purchase transactions. In order to verify the broker’s note issued by M/s. Alliance Intermediaries & Network Private Limited, the AO issued notice under section 133(6) of the Act was sent to National Stock Exchange of India Ltd. which was replied by NSE vide letter dated 22.11.2012 stating that the broker M/s. Alliance Intermediaries & Network Private Limited was registered in the capital market segment on 12.10.2000 and thereafter the registration was cancelled on 12.02.2004 and thus no details are available with the Exchange of any such transactions. Finally, the AO added Rs.16,48,417/- as undisclosed income besides adding 5% towards commission and framed the assessment vide order dated 28.12.2012 passed under section 143(3) read with section 147 of the Act.
The Ld. CIT(A) also dismissed the appeal of the assessee by observing that the purported share transactions were not genuine and were rightly brought to tax by the AO under section 68 of the Act.
3 Mr. Alpesh Popatlal Rathod 5. We have heard the rival submissions of both the parties and perused the material on record including the share broker notes issued by M/s. Alliance Intermediaries & Network Private Limited. We observe that the assessee has purchased 1200 shares of Hindalco Industries for Rs.15,60,200/- on 06.04.2004 and sold on the same date for Rs.16,47,522/- without taking any physical delivery. Similarly some other transactions were made. The Ld. A.R. submitted before us that the assessee has not made any payment for the said shares as the sale and purchase was made on the same date without taking any physical delivery whereas the profit on these transactions was returned as speculative profit to the tune of Rs.1,67,929/-. We also find merit in the Ld. A.R.’s contentions that since the assessee has not made any payment for the purchase of said shares of Hindalco Industries and it was only the difference which was shown as speculative profit as the sale and purchase was done on the same day. It is amply clear from the cover notes filed by the assessee during the assessment proceedings that the transactions of purchase and sale of shares were done on the same date and no payment was remitted for purchasing the shares. Likewise no sale consideration was received from the stock broker but a net profit was shown as speculative profit. So it can not be said that the assessee was beneficiary of bogus bills which were part of hawala racket operated by Mahasagar Securities Ltd. and its group companies specially considering the fact that no payment was made for the purchase of shares. However, we are of the view that the cover notes evidencing
4 Mr. Alpesh Popatlal Rathod the purchases and sales of shares need to be verified and examined at the level of AO. We, therefore, restore the issue back to the file of AO for limited purpose of verification of the said documents and decide the issue accordingly.
In the result, appeal of the assessee is allowed statistically.
Order pronounced in the open court on 22.10.2018.